DEF: Pioneer ILS Interval Fund Seeks Shareholder Approval for Victory Capital Advisory Agreement Amidst Amundi Merger

Pioneer ILS Interval Fund is asking shareholders to approve a new investment advisory agreement with Victory Capital Management Inc. following Amundi's agreement to combine its US holdings with Victory Capital.

Summary

• Pioneer ILS Interval Fund is holding a special meeting on March 27, 2025, to seek shareholder approval for two proposals.
• The first proposal involves approving a new investment advisory agreement with Victory Capital Management Inc. (Victory Capital).
• This is due to a binding agreement between Victory Capital's parent, Victory Capital Holdings, Inc., and Amundi to combine Amundi Holdings with Victory Holdings.
• The Fund's current investment advisory agreement with Amundi Asset Management US, Inc. (Amundi US) will automatically terminate upon the transaction's completion.
• The new agreement proposes that Victory Capital will succeed Amundi US as the Fund's investment adviser.
• The Fund's current portfolio managers are expected to continue managing the Fund as members of Pioneer Investments, a Victory Capital investment franchise.
• The transaction is not expected to change the Fund's current investment objective and strategies.
• The advisory fee rate under the new agreement will remain the same as the current agreement.
• Victory Capital has agreed to waive advisory fees and/or reimburse expenses for at least three years after the transaction closes to maintain the Fund's total net annual operating expenses at or below current levels.
• The second proposal asks shareholders to elect Trustees of the Fund, including David C. Brown, Chairman and CEO of Victory Capital and Victory Holdings.
• Shareholders of record as of February 7, 2025, are entitled to vote at the Special Meeting.
• 74,206,488.932 shares of the Fund were outstanding as of February 7, 2025.
• The net assets of the Fund as of February 7, 2025 were $653,841,026.99.
• The transaction is expected to close at the end of the first quarter of 2025, pending regulatory approvals and other conditions.
• If shareholders do not approve the new agreement, an interim agreement with Victory Capital will take effect for up to 150 days, with compensation held in escrow.

Sentiment

Score: 7

Explanation: The document is neutral to positive. While it requires shareholder action due to a merger, it emphasizes continuity of management and investment strategy, with a commitment to maintain current expense levels. The transaction is expected to close at the end of the first quarter of 2025, subject to regulatory approvals and other conditions.

Positives

• The Fund's current portfolio managers are expected to continue managing the Fund under Victory Capital.
• The advisory fee rate will remain the same under the new agreement.
• Victory Capital will waive fees and/or reimburse expenses for at least three years to maintain current operating expense levels.
• Victory Capital's distribution capabilities may provide additional opportunities for the Fund to grow assets and lower fees and expenses through increased economies of scale.
• The Transaction is not expected to have a material adverse impact on the nature, scope and overall quality of services provided to the Fund and its shareholders, including investment advisory, risk management, administrative, compliance, legal and other services.
• The Fund will not bear the costs of obtaining shareholder approval of the New Investment Advisory Agreement, including proxy solicitation costs, legal fees and the costs of printing and mailing the proxy statement, regardless of whether the Transaction is consummated.

Negatives

• The Fund's current investment advisory agreement with Amundi US will automatically terminate upon the transaction's completion, requiring shareholder approval of a new agreement.
• The expense ratio of the Funds shares for the most recent fiscal year was in the fourth quintile (relative to its Strategic Insight peer group for the comparable period.
• The Funds advisory fee for the most recent fiscal year was in the fifth quintile relative to the advisory fees paid by other funds in its Strategic Insight peer group for the comparable period.

Risks

• The completion of the transaction between Amundi and Victory Capital is subject to regulatory and other approvals, and may not occur.
• If shareholders do not approve the new investment advisory agreement, an interim agreement will be implemented, potentially creating uncertainty.
• Operational or other failures, including cybersecurity failures, at any one or more of the funds service providers could have a material adverse effect on the fund and its shareholders.
• The Boards oversight of the risk management processes of those service providers, including processes to address cybersecurity and other operational failures, is inherently limited.

Future Outlook

The transaction is expected to close at the end of the first quarter of 2025, subject to regulatory approvals and other conditions. The Fund's current portfolio managers are expected to continue managing the Fund under Victory Capital, with no changes to investment objectives or strategies.

Management Comments

• Victory Capital has advised the Board that it does not anticipate that having Victory Capital provide investment advisory services would result in any reduction in the level or quality of services now provided to the Fund.
• Victory Capital is not aware of any circumstances that may have any adverse effect on its ability to fulfill its obligations to the Fund.
• The consummation of the Transaction is not expected to (1) result in any significant changes to the day-to-day management of the Fund, (2) affect the Funds investment objective or investment strategies, or (3) impact the investment philosophy or process of the Funds portfolio management team.

Industry Context

The consolidation of asset management firms is a continuing trend in the industry, driven by the desire to achieve economies of scale, expand distribution networks, and enhance investment capabilities. This transaction reflects that trend, with Amundi seeking to become a strategic shareholder in Victory Capital while establishing a long-term reciprocal distribution partnership.

Comparison to Industry Standards

• Victory Capital's AUM of $171.9 billion places it among mid-sized asset managers, while Amundi Parent's $2.3 trillion AUM ranks it among the top global players, comparable to firms like BlackRock and Vanguard.
• The advisory fee structure of 1.75% on assets up to $1 billion and 1.70% above $1 billion is relatively high compared to passively managed funds but may be typical for actively managed interval funds investing in less liquid alternative assets.
• The expense ratio of the Funds shares for the most recent fiscal year was in the fourth quintile (relative to its Strategic Insight peer group for the comparable period.
• The Funds advisory fee for the most recent fiscal year was in the fifth quintile relative to the advisory fees paid by other funds in its Strategic Insight peer group for the comparable period.

Management Changes

Stakeholder Impact

• Shareholders will vote on a new investment advisory agreement and the election of Trustees.
• The Fund's portfolio managers are expected to continue managing the Fund, ensuring continuity for investors.
• Victory Capital will waive fees and/or reimburse expenses for at least three years to maintain current operating expense levels, benefiting shareholders.
• The Transaction is not expected to have a material adverse impact on the nature, scope and overall quality of services provided to the Fund and its shareholders, including investment advisory, risk management, administrative, compliance, legal and other services.

Next Steps

• Shareholders need to vote on the proposals by March 26, 2025.
• The transaction between Amundi and Victory Capital is expected to close at the end of the first quarter of 2025, pending regulatory approvals.
• If the new investment advisory agreement is approved, Victory Capital will become the Fund's investment adviser upon closing of the transaction.

Key Dates

Keywords

investment advisory agreement, Victory Capital, Amundi, merger, investment management, proxy statement, shareholder vote, trustees, Pioneer ILS Interval Fund